Residential landlords paid tax on only 63% of rental income

Landlords claimed allowable expenses of more than €1bn to cut tax bills

Residential landlords paid tax on only 63 per cent of their rental income in 2018, figures from Revenue show, as they claimed total deductions of €1.14 billion that year.

However, the figures also show taxation levelled on landlords has increased in recent years, while the number of individual landlords filing tax returns appears to be falling.

Figures for 2018, the most recent year available as returns for 2019 have only just been filed, show that individual landlords, who must file a Form 11 to declare their rental income declared such income of €3 billion on residential rents that year, up by €195 million on 2017.

More than a quarter of all those who filed Form 11s that year, or some 160,000 taxpayer “units” – the Revenue counts taxpayers in units, which includes jointly assessed couples – reported residential rental income, indicating average income of €18,750 per taxpayer.

This is in line with 2017, when 155,000 taxpayers declared such income. The number of landlords however, is down significantly on 2016, when Revenue first compiling such data. That year 193,077 “units” declared rental income.

Residential landlords declared deductions, or allowable expenses, of €1.14 billion or 37 per cent of total income. Deductions include money spent on repairs, mortgage interest and other expenses such as insurance.

This means that landlords only paid tax on 63 per cent of their income or on profits of €1.9 billion in 2018.

However, the proportion of a landlord’s income that is taxable has increased in recent years. In 2016, for example, landlords declared deductions on 41 per cent of total income, falling to 39 per cent in 2017 and then to the aforementioned 37 per cent in 2018.

The figures suggest that a landlord with income of €2,000 a month, or €24,000 a year, would have claimed deductions of about €8,880 against this income, leaving taxable income of €15,120. This income is then liable to income tax at either 20 per cent or 40 per cent, as well as PRSI and USC.

Larger landlords

While individual landlords must pay rental income, larger residential landlords, such as real estate investment trusts (reits), do not pay any corporation tax on their profits and gains from rental business.

In 2019, for example, Ires Reit, which has a portfolio of some 3,600 residential units, reported a total profit of €86.3 million, and paid no corporation tax on this.

Similarly Icavs (Irish Collective Asset Vehicles), also known as QIAIFs (qualifying investor alternative investment funds), such as those used by Kennedy Wilson, which has an extensive residential property portfolio in Dublin, are often not subject to tax on rental income in Ireland either.

Fiona Reddan

Fiona Reddan

Fiona Reddan is a writer specialising in personal finance and is the Home & Design Editor of The Irish Times